I don’t play Mafia Wars, Farmville or anything on Zynga. Well, actually, I was a Zynga Poker regular for maybe 3 months. Then I grew out of it. Never paid real dollars. I don’t click on all those rectangles on the side offering me avenues to talk to beautiful single girls or make friends or another MBA degree. To sum it up I am not being useful for advertisers.

So where is the value for advertisers? Are they getting enough pageviews and clicks that can justify the $50B valuation for FB? Or are they doing it because competitor next door is doing it? Every company has to have a page on FB and when you “like” it you start getting updates, deals and what not. So the page where you wanted to stalk your crushes or follow your friends might become a pile of all these corporations trying to get that sweet dollar out of your pocket (actually the credit card). I am sure a lot of the users don’t want anything to do with advertisements. So it seems to me that the advertisers are spending their energy to capture the users which are not interested.

What if the advertisers could advertise at an avenue where almost all of the audience want to see advertisements by brands, products etc.? A place where the users can view ads for all the new smartphones, cars or whatever they like. They can rate them and help other users. They can be directly led to shopping page from there with possible discounts.

Value of this portal – Users are serious and interested. Either they want to catch what’s new or they are potential buyers. Advertisers get traffic that is really at that online community because they want to. Think of forums where passionate people exchange ideas ad contribute. My guess is this will result in higher conversion rate. This could be also a tool to get feedback on their advertisements.

I am not sure how to monetize it and even if it will work or not. I am not an expert on advertising practices and have not been in touch with enough inside people to come up with something concrete. But that’s the initial idea. I find solace in the fact that my country has enough coders to put up a working model (if this makes sense!!).

Irony: I did share this on FB

The bottom pane in the attached picture shows the leverage (Total Debt/Total Equity) for S&P500, Shanghai Composite and Nifty (India) over time. While the  companies in US (green line) appear to have been de-leveraging since 2007-08, Indian companies (white line) have come out of the slump borrowing more and China (yellow line) looks highly leveraged to me. Can we expect Chinese companies to keep on this course even after the rampant inflation and subsequent rate hikes? Between India and China, GDP and trade numbers could support big debt for China but when talking of US I feel the return on equity for investors stands a better chance of appreciating just from the “room” for leverage perspective. Now the US firms not willing to do it right now in spite of all the help from Fed is another matter.

1. Does the company have products or services with potential to add to sales for at least several years?
2. Does the management have ability and determination to keep looking for new products and services?
3. How effective are the R&D efforts of the company relative to its size?
4. Does the company have an above-average sales organization?
5. Does the company have  a worthwhile profit margin?
6. What is the company doing to protect and improve the margins?
7. Does the company have outstanding labor and personnel relations?
8. Does the company have outstanding executive relations?
9. Does the company have depth to its management?
10. How good are the company’s cost analysis and accounting controls?
11. What’s the company’s competitive position in relation to its competitors?
12. Does the company have  a short-term or long-term outlook in regard to profits and growth?
13. Does the future growth require additional equity financing in the foreseeable future?
14. Does the management talk freely to investors when times are good but “clam up” when they have bad news?
15. Is the management of unquestionable integrity?

I don’t think these points need elaboration by me. Read Fisher. In any case, an investor would do himself and his clients a great service if he builds his research around these points and only conservatively pick the investments that score high on majority of these.

Here I have tried to compare the recent recession and the dot-com bust. In Mar 2000, S&P reached a high of 1552 and touched a low of 768 in Oct 2002. It took roughly 31 months for S&P to drop by 784 points (50% from high). At the start of current recession, S&P touched a high of 1576 in Oct 2007 and touched a low of 666 in Mar 2009. It took roughly 17-18 months for S&P to drop by 910 points (58% from high).

Now the latest short-term high of S&P is 1227 which was reached in Nov 2010 but S&P was first close to this level (1220) in April 2010. From a low of 666 to high of 1220-1227, S&P has thus recovered ~62% (remember that guy Fibonacci) of the previous high-to-low drop (i.e. S&P has recovered by 560 points = 62% of 910 points) in 14 months. During the recovery from dot-com, S&P took 37 months to recover 62% of the previous drop and while it continued to rise higher from that point to next high in 2007, saying that S&P is bound to rise higher from where it is now would be too arrogant.

Point to note is that during the current recession both the drop and the rise took relatively less time which, I think, is another measure of the volatility in the markets. High leverage, a lot of money following limited number of strategies or minuscule profits and high correlation are responsible for this volatility.  If I were a hard-core Fibonacci believer, I’d predict that the markets would hover around the current levels for next 3-6 months and then we could see an upside when all the surplus could really start to have some effect. Though I am not ready to invest based on this analysis since I have joined the Graham and Doddsville University of value investing and am determined to follow that path now.

I can not say for sure that financial crisis has made smart money smarter but I definitely believe that the quant PhD camps are on to devising the new high yielding vehicles. Heard of mortality swaps?

Well. It’s summer and this Sunday I had a trip to Snow Valley Ski Resort on the mountains in San Bernardino National Forest. There was a triathlon event and my roommate took me up there and we volunteered. That was some great fun. Beside the lake among the mountains, I had “the moment”. It was ecstatic. I was so excited that I called friends in India to tell them. Great walk on hilly terrain, almost toppled one time. Felt nice doing some volunteer work. And it was inspiring watching all those people swim, bike and run. People from all age groups, even 70s and that means something. I am going to start run at least for the start. Need to find a place to swim. I was damn tired till we got back and dozed off whole evening. Hell, I had to go to the Indian store. Maybe during the week. Eager to start second week at work.

And now, here I am in breezy (at least for now) Pasadena . I am enjoying the weather. Moved into the apartment tonight. One more block of moments is under construction…….

Not surprised to see that a lot of people suspect conspiracies behind the working of financial markets. In this post, Mike dispels these claims regarding the fall of Bear Stearns. In these modern markets, we don’t need any conspiracies or even insider info for disasters. Uncertainty and leverage combined with disregard for risks can bring any BEAR down !!!

November’s employment situation is reported to be unchanged (-11,000) with unemployment rate down to 10.0 %. I am not sure how these numbers are calculated (and exactly what is reported) but I read that market experts do not have much faith in them and doubt the methodology. Here is a funny clip showing how to test whether you are unemployed or not.

In all, I believe we are going to see pretty rough times again with increased volatility. Keep an eye.